Hey, remember Bones? That long-running Emily Deschanel/David Boreanaz procedural about the magical smart lady who studies dead people and also writes novels, and the pretty-average FBI pencil pusher who swans in to handle the arrestin’? Also, romance I think? If you’re like me, you might have forgotten that the series had actually reached its conclusion back in 2017 after twelve seasons. Of course, if you’re like me, you also probably never watched the show when it aired, and only caught up on it in those 7-hour syndication blocks on TNT because you were too lazy to change the channel after the Supernatural syndication block ended. Can you believe what happened to that poor kid from Freaks And Geeks? What a shame. That one hurt.
Anyway, it turns out that life behind-the-scenes of the hit network drama wasn’t all dead-kittens and science-explainey rainbows after all. Bones had a case of its own to solve: What Happened To All Our Money? And as usual, the culprit turned out to be a lying, cheating studio (in an old man Murdoch mask). The Hollywood Reporter recently published an in-depth look at the legal battle over profits from the series, including the arbitration between Fox (which produced and distributed Bones) and the people who have a stake in the profit participation for the series (namely Deschanel, Boreanaz, exec producer Barry Josephson, and Kathy Reichs, the author whose books inspired the series). That arbitration just ended in a landmark decision that grants a whopping $179 million award to the profit participants — the second largest award of its kind in TV history (after a jury made Disney cough up $319 million in profit-sharing over Who Wants To Be A Millionaire back in 2011). And, obviously, Fox is attempting to overturn the decision.
In many ways, this case isn’t surprising in the least, but it does offer a fascinating glimpse at the media landscape we’re dealing with. Determining the value of a television show isn’t as simple as looking at how much advertisers are willing to spend during its commercial breaks. What this case reveals is how flagrantly the confusion over what constitutes “market-value” these days can be manipulated to keep money in the pockets of distributors and out of the hands of creators. At home and abroad, shows can be sold to broadcasters and streaming platforms, and priced differently for reruns vs premiere windows or exclusive rights in that territory. Rights to a show can be packaged as part of a deal for a whole catalog of programs instead of being sold on their own, or shows can be sold multiple times in the same region but in different languages. Partners can pay to air a show once, or unlimited times — or buy it out for a year or a decade. And license fee negotiations can be impacted by other elements, like a platform agreeing to spend more on marketing the show heavily in their area, which can raise the program’s profile and perhaps boost sales of consumer products. A situation like that could justify the distributor accepting a lower license fee, because in the long run. they’ll stand to earn more for the show overall (within reason!). The point is, there are a lot of considerations that go into making licensing deals. Handling TV Sales contracts was my job for a few years, and I’m familiar with seeing how shows are broken down, exploited, and monetized globally. It’s kinda like a big puzzle made of IP — only the pieces are put together in whatever order will result in the most dollar signs.
Which is why reading through the details of this arbitration just made me cringe, because the way Fox seems to have gone about maximizing profits wasn’t by, say, knowing the market and making smart deals for Bones. Instead, Fox covered their tracks by selling the show to themselves — both their own overseas affiliates, and Hulu, which they have a large stake in — for essentially peanuts. On paper, it makes it look like a show is less profitable compared to the costs of production, meaning there’s less money left over to be shared with creators. However, it’s a deal that benefits Fox overall because those affiliates and Hulu aren’t spending as much for their content, which helps THEIR bottom lines. It was so bad that, during arbitration, it became clear Fox wasn’t even sure what the market value for Bones should have been, since they’d never cared. It was moot, because they weren’t ever really trying to negotiate accurate license fees for it — and that put them in breach of contract with the show’s stars and creators, thanks to self-dealing protection clauses that guaranteed deals for the show had to be “as good as marketplace deals.”
The fraud only got stickier from there, as the studio blocked complaints from the profit-participants by threatening to cancel the series — though it was an empty threat, and the studio had no intention of canning the show. They just wanted to make sure nobody could sue them.
Josephson and Reichs signed releases barring them from challenging license fees for the fifth and sixth seasons upon Fox’s word that unless everyone signed these releases, Bones would be canceled. According to Rice, though, Fox already had committed contractually to keep the show on the air and knew that Boreanaz and Deschanel would never sign such a release. Nevertheless, Fox kept up the impression the stars would sign, even going so far as to include blank signature spaces for the actors in the releases sent to the producers.
What’s more, at this exact same moment, Bones showrunner Hart Hanson also signed a release, which in itself wouldn’t be problematic but for the fact that unbeknownst to the others at the time and contrary to Fox’s representations back then, he was in the midst of signing a rich new deal to continue on the series. Hanson was represented by attorney Jeanne Newman, the wife of Gary Newman, then the co-president of Fox TV.
And as the industry watches what will become of Hulu in light of Disney’s acquisition of Fox, which will give the conglomerate a majority stake in the platform, this case becomes especially interesting. Up until now, how much of Hulu’s success has come from getting sweetheart deals for content from its stakeholders? For the first season of Bones, for example, Fox Broadcasting struck a deal with Hulu for a “share of speculative advertising revenue.” Which means they sold the show at no fixed price, on the promise of some uncertain fee to be determined later. And that’s… WEIRD. That’s some no-strings-attached shit! If you’re going to agree on a share of future profits, you at least set some goalposts — and you usually make sure if those AREN’T met, that there’s an underlying backup fee agreed on. Not only does it sound like Fox didn’t usually agree to these sorts of deals, but the idea of a fixed license fee never even entered the negotiations. And that means that Hulu’s growth was on the back of content creators who weren’t properly compensated for their work — and benefited the shareholders aside from Fox as well.
How many other shows were sold under conditions like these?
BUT IT GETS WORSE:
In his decision, Lichtman [the arbitrator] then addresses what he considers “perhaps the most shocking piece of evidence related to the Hulu issues… Fox actually signed both sides of this agreement. Mr. Dan Fawcett signed the Fox Content License Agreement on behalf of both FEG [Fox Entertainment Group] and Hulu.”
Fox had to defend being on both sides of the same transaction.
Chernin, former head of Fox Broadcasting and now one of the most powerful producers in Hollywood, was asked how this was possible. He answered, “I have no idea.”
The arbitrator concludes, “The obvious inferences of self-dealing, conflict of interest and the lack of any arm’s length negotiations leap off the page.”
I’m only scratching the surface of the flagrant misconduct Fox appears to have engaged in, so I definitely recommend reading the full THR article if you’re interested. And as for that $179 million award? Well, some of that is actual damages from the series being undersold on networks and in other territories. The arbitrator also looked at comparable benchmarks for similar series and determined that Bones should be earning a per-episode license fee of $685,000 from Hulu, so that accounts for about $10 million in that award. But the vast majority of the total is purely punitive:
“As such, in light of Fox’s financial condition, a punitive damages award in the amount of $128,455,730 is reasonable and necessary to punish Fox for its reprehensible conduct and deter it from future wrongful conduct.”
Fox is fighting back and hoping to overturn the punitive damages — though they’ll likely have a hard time proving the arbitration went beyond the scope of its authority. But what’s going to be more interesting is seeing how this decision impacts future cases (like the one AMC is facing over The Walking Dead). As Hollywood media mergers persist, conflicts of interest will only become more commonplace and self-dealing even easier — and that’s in addition to an industry still working out the complicated calculus on new media ventures and what their content is worth in the ever-changing marketplace.
Though the cynic in me wonders if the most lasting impact of this case will be as an object lesson to distributors on the importance of covering their tracks better.
Header Image Source: Fox